I’ve heard a lot of mixed views about structuring deals that don’t require 100% payment upfront. Instead, the owner typically receives a payment upon closing and either a profit share or structured payments over time, depending on the success of the company who buys the name. If you can afford to wait to be paid, I think these types of deals are fantastic.
When I was at AIG (accident insurance sold via direct mail, phone and web), many of our deals were structured to benefit the marketing partner more on the back-end in exchange for concessions on the front end. Our partners knew our group’s track record, the LTV of customers, and they knew a back-end deal could be more lucrative. This allowed our group to spend more on testing and helped our current P&L. Only if the campaigns were successful would we have to pay a greater share of the long term revenue.
For domain deals, I think this could work in the same way. The caveats, of course, are that the buyer has a track record of successful Internet companies and that you retain control of the domain name if the business fails. While the upfront profit may be less, the back-end potential should be set up to be far greater than if someone would pay all cash. Doing a deal like this really requires you to not need the cash upfront, but it could be beneficial if structured correctly.
Many of the largest domain companies and domain venture capital companies have been successfully structuring their deals with less cash upfront and greater back-end considerations. If someone with a proven track record and a solid deal were to approach me, I would strongly consider a mutually beneficial deal structured in this manner.
My thought on this is to make sure that there’s enough money involved to do a non-cash deal. The legal requirements for a deferred stake/payment are more involved. Also, if there’s not enough money at stake it won’t be worth going after the buyer to get any money they don’t pay you later anyway.
End user deals are not only beneficial for a much larger payout to the domain owner, but also enable tremendous ancillary benefits such as PR that can bring in additional buyers for other domains for sale in the portfolio, networking with the corporate partners of the acquiring company, secondary business and investment opportunities that arise out of the new business relationship, and many more benefits.
I would recommend anyone seeking end user deals to have someone who is well seasoned at doing these kinds of structured deals handling them for you. First off it looks much more professional when the seller isn’t dong the deal pitching, and secondly a pro negotiator can get you a much stronger deal, and be sure all the potential pitfalls are addressed.
Rick Schwartz and I are going to be teaming up together on end user deals in the months ahead, not only for his top domains but also for some other top owners I’m working with. He’s really top notch at negotiating. I’ve got a huge amount of one word domains in inventory that are phenomenal for end user acquisitions and I’ve established a ton of corporate connections over the last several years of specializing in these kinds of long term multi-payout structured purchases. So teaming up togehter will help other domainers to get these kinds of huge 7 and 8 figure deals done also.
It should also be noted, despite the current economic crisis, I’ve seen more interest than ever in top quality domains now from corporate end users, who are finally realizing the cost efficiency of owning properties that provide constant lead generation with zero ad costs.
Kevin
BigTicketDomains.com
hi,
interesting post elliot…always enjoy reading your posts and insight into things.
i dont know kevin all that well but he is right on…from what i am learning, putting deals by someone else is surly a better route…
i am sensing elliot since you know who the real deal makers are like kevin, the geo platform owners and there numerous successes you could be leading towards in a partnership on your geo names with a team of professionals that know what there dealing… just thinking on this and i could be wrong on this and my assumption.
rick surly has made a lot of money over the years and i think its great kevin is part of the deal makings… domain name(property) + end users contacts = success
or
geo big time players + partnership = success
the saying goes build it they will come but its not as easy as it sounds…domaining and ppc parking is dead in the water…one day google, yahoo and parking companies will have a major shake out… google all ready is doing things for domainers and the writting is on the wall…you need a solid business plan, private ads running on site and going after the end users…the google adwords and ppc feeds will one day disappear i feel….(i am sure a lot of readers will say this jeff guy is nuts and far fetched on this)…give it 3 years and the domain values will tank, revenues tank, parking companies will go under unless you form your own network like marchex or partnerships or you have liquid cash.
sorry for rambling to much
I’m a relative newbie to the domain industry, but I’ve been slowly investing in domains for the last several years. I now have around 1,000 domains plus and am looking to make something of them…anyone interested in a partnership is welcome to contact me. You can find my email under the WhoIs for: Humiliated.com
Andrew
Bamboo Holdings, LLC.